As the banking and securities industries undergo a radical shift in legislative and regulatory actions, the need for reliable financial compliance software is increasingly becoming essential. The current global economic crisis has prompted regulators of the Securities and Exchange Commission (SEC) and the National Association of Security Dealers (NASD) to go into full-on enforcement mode. Compliance officers who in the past may have dismissed regulations like NASD Rule 3060 as innocuous, will now have to adjust to a environment of close scrutiny. Related reading: this helpful guide.
History shows that financial oversight and enforcement of rule compliance by regulators is usually higher during difficult economic times. Many observers of the financial industry and economic analysts believe that most financial crises are provoked by a fundamental relaxing of financial controls. In the 1980s it was the Savings and Loan crisis, as well as the insider trading debacle. A laissez-faire approach to financial oversight was to blame at the time. Then in the late 1990s the bursting of the dot-com bubble rocked Wall Street to its core, leaving many investors wondering if compliance officers had been asleep at the wheel the entire time. The US housing crisis and subprime mortgage meltdown in the first decade of the new century unveiled improprieties of billionaire proportions, once again placing serious doubts about the integrity of finance and investment professionals.
Each of the episodes described above caused regulators and legislators to scramble and make concerted efforts to avoid future disasters. The sheer magnitude and far-reaching effects of the current economic crisis have prompted passage of legislation that is deeply focused on ensuring compliance, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The fragile state of the economy today is the main reason why regulators have adopted a decisive stand on enforcement. Compliance and oversight are considered to be essential in preventing another American financial crisis, something that could have a disastrous impact on several world economies.
The increased call for compliance has exposed the complexity of certain rules and how easily they can be accidentally circumvented. In the case of NASD Rule 3060, the Financial Regulatory Authority (FINRA) has issued interpretive guidance and reworked the regulation into FINRA Rule 3220. The SEC granted the change and adoption of the rule in 2008. The focus of FINRA Rule 3220 is to place limits on undue gifts, entertainment and political contributions made to clients or employees of other businesses by registered securities dealers. Keeping tabs on gifts and treats made by employees to ensure proper disclosure and compliance is easy thanks to financial compliance software.